95. Memorandum From Secretary of the Treasury Fowler to President Johnson1
Washington, August 31, 1967.
In response to your request at the National Security Council meeting
yesterday, I am attaching my views of what the United States should be
saying to the Japanese in forthcoming meetings, beginning with the September
13–15 Joint Cabinet Meetings.
It is important that we pursue these balance of payments objectives with
Japan independently and separately, regardless of what may evolve in
negotiations over the Ryukyu Islands.
The time has passed for general discussion with Japan of balance of payments
cooperation, and we should make the specific points set forth in the
attached paper.
Attachment
TALKING POINTS FOR USE WITH JAPANESE OFFICIALS
- 1.
- The U.S. proposes that the U.S. and Japan form a balance of
payments committee—under Treasury and Finance Ministry
leadership—which would have the following tasks (among others which
may be defined):
- a.
- To discuss each country’s trends and outlooks,
- b.
- To maintain a current joint accounting of each country’s
balance of payments, and
- c.
- To examine the various technical possibilities for balance
of payments cooperation, including the field specifically of
military transactions.
- 2.
- With respect to military-financial planning the U.S. places great
importance on complementary U.S./Japanese actions. Within the
framework of complementary military roles in the area of Japan and
an overall level of defense as determined by the Japanese
Government, we believe there is wide potential for
increased Japanese military procurement in the U.S.—up to 1/3 of
the $2.8–2.9 billion in the Five Year Defense Plan earmarked for
procurement of new equipment. (See attached principles for
military-financial planning which would also be presented to the
Japanese.)
- 3.
- We should seek to cover by other financial measures any gap which
remains between the receipts from Japanese military procurement in
the U.S. and the amount of U.S. defense expenditures in Japan (a gap
of probably at least 65%). Such measures would expand current
cooperation to consider purchase of long-term (4–5 years) U.S.
securities, prepayment of debts (PL 480, GARIOA, etc., amounting to over $400 million) and
repurchase of Japanese securities held by U.S. agencies.
Arrangements might consider earmarking the funds invested in
securities for increased Japanese contributions to regional economic
development at the time of redemption.
- 4.
- The U.S. suggests also that we jointly consider other means for
balance of payments cooperation and sharing the non-military
economic burdens in Asia, such as Japanese actions to: (a)
liberalize its outward investment controls (b) seek increased access
to European capital markets (c) remove non-tariff barriers (d)
expand markets in Europe and reduce reliance on exports to the U.S.
(e) expand its economic aid contributions in Asia and (f) assume a
larger share of non-military aid to South Vietnam and plan a major
role in rehabilitation efforts there after the conflict ends.
Attachment
PRINCIPLES FOR U.S.-JAPANESE MILITARY-FINANCIAL
PLANNING
- 1.
- Japanese dependence on local industry for military supply
principally when it is cheaper than supply from abroad.
- 2.
- Japanese acceptance of the principle that U.S. industry should
have a full opportunity to compete with third countries for military
purchases.
- 3.
- Japanese purchase of military equipment from the U.S. whenever it
is desirable to do so for cost, technological or military
compatibility reasons.
- 4.
- Japanese development and production in selected cases where a
premium for the technology rather than employment is considered
particularly advantageous to the future national, as distinct from
solely military, growth.
- 5.
- Establishment of a cooperative research and development program,
whereby (a) Japanese interests in military technology can be
advanced to the maximum possible extent consistent with most
efficient use of its budget resources, and (b) projects in the field
of equipment co-production can be facilitated.
- 6.
- Japanese cooperation in continuing U.S. efforts to reduce the
amount of its defense expenditures in Japan.
